A 1998 article from Black Flag contrasting the emerging "tiger" economies with the uprisings in Mexico and Albania.
A boom in economic growth since the late 1980s has nurtured a casino full of billionaires in the advanced economic nations of the world. Since the summer of 1997 that boom has been collapsing. Whether this crash will lead to a global slump or not is unclear but the panic has already rewarded us with incredible insights into how modern capitalism now works. On first inspection it was the meltdown of the South East Asian countries (Malaysia, Singapore, Thailand, Indonesia, South Korea etc.) which was of the greatest significance. For years these nations, built on the ruins of defeated revolutionary movements, had been held up by the world's economists and politicians as perfect model states for the West to emulate. The fans of Asian business first denied that corruption, nepotism, militarism and harsh penal systems were endemic in these countries, next they excused their presence as the unfortunate side effects of growth. Finally, with the boom in full swing, they endorsed them as features of a well functioning economy. As observers have noted these gurus, including Tony Blair and his government, were declaring their love for the "Asian model" at precisely the moment it was about to decisively fall apart1 .
Observers are wrong however if they expect the economic disintegration of Asian dictatorship (infatuation with which has seen even Maoism rehabilitated by the West's politicians) to cause anything other than momentary embarrassment. The crash will not cause any great ideological crisis for those who have earned their living praising "Tigerism". In admiring the Asian model they have simply been obeying their line-managers' instructions and lyricising the ongoing defeat of revolutionary movements anywhere on earth. The glorification of South East Asia demonstrates as clearly as possible that the world's bosses would point in admiration at a burning tyre-dump and refer to that as the perfect model of economic progress if it were the product of a crushed revolution. It is not the collapse of the Asian economies which is causing them nightmares but the possibility of renewed revolutionary movements now emerging, and with good reason because this crash has revealed to us just how powerful such movements have become.
When The Rich Throw A Party
The boom of the 1990s, like that of the late 1920s, has been one from which the bulk of the human race has largely been excluded. The rewards of the stock market rally which preceded 1929, though portrayed in the books and films of the time, were in reality fully enjoyed only by the rich and upper middle classes of America. It was the effects of the crash which were liberally distributed amongst the general population. All that has changed between then and now is the scale of wealth amongst the super rich and their globalization as a class. Today's upper classes stand so far above the general population that this time their economic boom has not even entered the imagery of popular mass culture. In the last decade the public have been permitted only fragmentary glimpses of the incredible party being held in the social stratosphere above them. They may not have fully appreciated the significance of these glimpses but they have been only too clearly aware of the sacrifices they have had to make in order to keep this party going. These are sacrifices in terms of lost welfare benefits, chronic overwork, mass poverty and widespread drug addiction. With world economic indicators since the final quarter of 1997 starting to point decisively downwards the public are about to suffer the hangover.
In the 1990s' boom the wealth of the super-rich has not manifested itself as a plethora of Rolls Royces, fur-coats or empty caviar jars but in the form of a new commodity. The nature of this commodity gives an indication of how vast the current resources of the rich are, it is the economy of an entire nation repackaged as an investment medium, the "tiger". One would have been forgiven for thinking the world was being overrun by big-cats during the 1990s. "Economic tigers" were springing up as fast as financial journals could churn out investment supplements to invent them. These so-called tigers were formerly backward nations which, after decades of stagnation, had apparently undergone some form of magical transformation to become budding, dynamic economies. Glib explanations for how this could have happened were blithely accepted. Populations, it was argued, were now demographically younger, or more computer literate, or entrepreneurial or generally happy to accept low pay and so conditions were ripe for take off. Time and again the fact that sky-scrapers now adorned the skylines of cities such as Jakarta and Kuala Lumpur, which only thirty years before had been colonial backwaters, was cited as proof that the "Asian miracle" could visit any country traditionally dismissed as structurally weak.
Initially most so-called tigers were characterised by dictatorial military governments, corruption and gangsterism, built upon a brutal history of crushing communist insurgency with the help of Western armed forces. This formula even held true in regimes ostensibly opposed to the West such as Burma who referred to themselves as "state-socialist". According to the worker's movement of the 1960s the production of tigers sprang from a gruesome strategy. In order to escape the endless ebbing away of their profits caused by the need for state intervention in the West's economies, the propertied classes of the 1960s went scouring the earth for colonial nations to reconquer as new markets in an insanely exaggerated form of neo-imperialism. The Vietnam war was being conducted as "the first testbed of this strategy, which, to ensure an exploitative peace, must start with a war of destruction... a long term strategy which hopes eventually to be able to write off military expenditures as mere business expenses..."2
The counter-insurgency wars of South East Asia in the 1950s acted as lesser versions of this extreme policy as did the breaking of rebellious peasants by indigenous Communist Parties and military juntas elsewhere in the developing world. By the 1990s the long-term strategy was bearing fruit. The process had normalized and taken on a logic of its own resulting in a new form of super-consumerism. Any relatively backward economy could now be promoted as a potential tiger no matter where on earth it was. Following the logic of marketing and property ownership a process of global gentrification had ensued. Any nation finding itself adjacent to a desirable area such as the European Union could declare itself the next tiger. Thus Ireland massaged its growth figures (through borrowing, underfunding of infrastructure, and creative accounting), ploughed its new found riches into a property boom in the docklands of its key cities, and preposterously re-emerged as the "green tiger" of Europe. Further afield Uganda rigged her stock markets and became the "black tiger" of Africa. Various South American states rode a "bolsa" of false optimism about their prospects and became "economic jaguars".
Pride of place in all these transformations lay with the "tigerization of communism". By the early 1990s the hitherto communist states of Eastern Europe were being touted by the West's financial cheerleaders as lawless but profitable frontiers, rich in that most fabulous of resources, an ocean of low paid workers with the minds of small children. These workers supposedly dreamed nightly of the luxuries of western consumerism and would accept any hardship for a glimpse of an opulent western high-street. The new "democratic" leaders of these states (in virtually every case, either former communist party bosses or mafia demagogues) were said to be embracing go-ahead capitalist reforms. Western investors were urged to "get in on the ground floor" before these potential European Union member states took off in earnest. The Czech Republic, Slovakia, Slovenia, Hungary, even Bulgaria were seriously proposed as the next booming economies, the "Slav tigers".
The Mexico Land Scandal
The breaking of the worker's movement and the rise of super-production caused the scale of wealth amongst the super-rich to become titanic by the 1990s. Whole nations were now being marketed to them as investment opportunities in the same way that stocks in companies had been offered for sale to the rich of the 1920s. But the utter fragility of these mythical "emerging markets" was momentarily revealed when a small group of guerillas in the southern jungles of Mexico chose New Year's Day 1994 to announce a revolution in the impoverished Chiapas region. Unhappily for international investors the "Zapatista guerillas" had been observant enough to time their insurrection to coincide with a widely anticipated rise in American interest rates. The effect was catastrophic. Bond markets (the stock markets on which countries are traded) plunged as the glamour of Mexico, a nation which, thanks to the NAFTA agreement, was meant to be about to join the USA and Canada as the next North American power economy, was suddenly revealed to be the corrupt, decrepit and over-leveraged basket case it actually was. Unable to suppress the uprising the Mexican government allowed it to rumble on throughout 1994. On December 20th the Mexican peso finally jack-knifed on the exchanges.
Consternation ensued and investors such as Chase Manhattan Bank looked briefly as if they might collapse. In their panic Chase revealed the scale of modern private property ownership by sending a fax to the Mexican president informing him that Mexico belonged to them and that as their estate manager he was responsible for protecting their property3 . They ordered him to attack the rebels with Mexican troops. This knee-jerk reaction by the super-rich only made matters worse however, by increasing the impression that impending revolution was about to sweep across South America. Across the world currencies plummeted. Things suddenly looked bleak for the rich. And it was at this point that the International Monetary Fund mutated. On President Clinton's orders it loaned Mexico more money than it had lent in all its previous loans added together. With this action the IMF began to shed its skin and lose its role as a post-war economic regulator to become an embryonic global state institution. This was not immediately apparent however. All that was clear at the time was that the confidence trick worked. The Mexican peso was rescued and the global investment party resumed. But the global bond crash of 1995 (following the Zapatista revolt) should have served as a warning to the rich. It was the latter-day equivalent of the Florida land scandal of 1925 reappearing at a higher economic level. The collapse of land speculation in Florida had been a warning to the American upper and middle classes of the 1920s that their entire speculative economy was on the brink of a far greater crash in 1929. It was a warning they chose to ignore.
Albania Goes Wildcat
No nation exemplified the hyperbolic delusion of tigerism more acutely than that most ludicrous of all tiger cubs, the newly "democratic" state of Albania. Any sane observer witnessing the disintegration of this ramshackle Balkan state amid national rioting in 199l might have had reservations about it having reformed sufficiently by 1995 to have become a budding contender for EU membership. Nevertheless, the more brutal the former communist dictatorship of a nation had been, the more enthusiastic international investors were to delude themselves about its future. Investors were told that, as in the post-fascist Europe of the 1950s, post-communist workers were now in love with the American way, reliable because they were still accustomed to harsh discipline, and cheap because they were used to low pay. No-one wanted to miss out on a potential "next Germany" whilst it was going so cheaply. And so the rhetoric which had hyped the American stock market to crisis point in the 1920s was repeated at the level of global super-investment in the 1990s. Albania duly joined the portfolio of tigerist investment opportunities. But Albania was to turn out to be a tiger too far. Because in 1997 an unexpected complication arose, Albania experienced one of the most profound proletarian revolutions of the twentieth century. Virtually the entire armed forces mutinied whilst workers formed revolutionary councils and seized 80% of the country. Suddenly all the holographic gift-wrapping paper tied around the Albanian leader Sali Berisha by his western backers fell to shreds at his feet. His regime (called "The Democrats" in case anyone suffered from the affliction of recognising him as a former Stalinist) was revealed to be a post-communist dictatorship smothered in mafia links. His so-called reforms were tottering pyramid schemes. Albania was still, after all, the corrupt and bankrupt "grapefruit republic" it had been in 1991. Worse, the workers, supposedly eager, would-be Disneyland tourists with lash scars still visible on their backs, were instead seen flaunting the entire apparatus of the state which they had looted to carry out a revolution against capitalism.
If the Zapatista revolt had been an alarm bell then this was an atomic explosion. No piece of fax paper or IMF loan to the Albanian government was going to extinguish the Albanian revolution because there no longer was a government. The revolution had extinguished the Albanian state. The world's investors began to panic. It took the armies of ten countries to crush the Albanian revolution and it was a close call. In the process the long planned conflict between Greece and Turkey over Cyprus had to be embarrassingly postponed whilst they pooled their armed forces for the invasion of Albania. But quelling the insurgency was to prove too little too late.
The Aftermath of Albania
By late May 1997 the Albanian revolution was crushed but the world's super-rich were still choking on their poolside margaritas. Suddenly all those toil-weary faces of eastern Europe ceased to resemble slave labour and looked threatening again, and this time in a very real way. Lulled by seventy years of academic analysis the world's super-rich had conveniently forgotten that the Russian revolution was originally aimed at them. Now they were rapidly remembering. As Albania's migrant workers returned to their factory jobs in Greece and Italy with a swagger in their steps the rich began to re-appraise the "tiger" economies. During the revolution the Albanian currency, the lek, had unsurprisingly been pulverized. Its forced devaluation was to become the first gust in a global hurricane. Next in the firing line were the currencies of the Czech Republic and Poland. These dived as investors began to fear revolution in every post-"socialist" country. Even the German mark began to fall as East German loyalty to the free-market came under suspicion. Just as in 1929 the infection began to spread. In the Great 1929 Crash the first stocks to evaporate had been the most ludicrous, the "Investment Trusts", stocks whose value had been based on total illusion. But this decline had rapidly affected more substantial company shares which were in turn discovered to be deeply indebted and over-valued. History repeats itself, the first time as catastrophe the second time as abyss. The meltdown of the American stock markets of the late 1920s now re-appeared in the late 1990s as the meltdown of whole economies. From fearing revolution investors began to fear risk of any kind, they no longer believed that the world's workers could be pushed beyond endurance by brutal dictatorships without rebellion, they now realized that the collapse of Stalinism did not mean the end of revolution but its reappearance, and they were scared. They drew a slide rule across the world's emerging economies look-ing for debt and instability and, in June 1997 their attention settled on Thailand.
Collapse Of The Asian Tigers
As early as April 1997 the World Trade Organization was releasing reports warning that economic growth in the "Pacific Rim" had stalled4 . Like incredible, Cyclopean versions of the Wall Street tip sheets of the 1920s however these reports were only downgrading South East Asian prospects in order to boost those of "under-valued" areas such as Latin America. The reports merely stated that growth had "plateaued out" in the Asian tigers as they had "caught up with the West". Investors hoping for spectacular gains would now need to look further afield for riskier but more rewarding "emerging nations". But if the warnings were not serious then the crisis in South East Asia was. Behind the glittering sky scrapers of Jakarta, Kuala Lumpur, Seoul, Manila and Bangkok lay financial pyramids bolstering quasi-military dictatorships armed by the West and linked to organized criminal syndicates, their economies dominated by impoverished workforces (though some now having to be imported). These were precisely the same conditions as those of the bankrupt confidence trick which had so easily unravelled in Albania, only on unthinkably larger scales. In June 1997 the baht began to fall, surreptitiously investors were withdrawing from the Thai currency. As a result of Albania confidence was waning in the management powers of any leadership, be it a "democratically elected" dictatorship, a divine monarchy or reformed "post-communism". As soon as the debt-ridden economy of Thailand came to be regarded as unsustainable those of its neighbours came under scrutiny too. The unimaginable was happening, those tigers par excellence, the economies of South East Asia which had, since the 1960s, stormed into commanding positions in world tables of economic growth, were disintegrating.
The period from June 1997 to January 1998 can be seen as a long, drawn out equivalent of the first two weeks of the 1929 Crash. Each rescue attempt organized by the world's banks produced a brief respite, a "dead tiger bounce" one might say, before the sickening decline resumed and spread still further. Each month a new "miracle economy" was revealed to be bankrupt and proceeded to plunge down the same drain as its unfortunate predecessors.
Globalization Of Financial Institutions
The "arrival of organized support" from the rich and their banks, which at first encouraged Wall Street to believe that the 1929 haemorrhage could be staunched, reemerged in the globalized form of rescue packages from the International Monetary Fund and the World Bank. And these rescue packages turned out to be just as ineffective as in 1929. No sooner was South Korea shored up with a dizzyingly huge $55 billion loan, after it publicly declared itself bankrupt on Boxing Day 1997, than Indonesia promptly announced its insolvency a week later. Foreseeing disaster financier George Soros called for the setting up of "an international body that would guarantee foreign loans and avoid a global economic meltdown". He proposed the creation of an "International Credit Insurance Corporation" as a sister organization to the IMF to "supervise international capital movements and regulate international lending"5 . In trying to suggest ways to tide the bankrupt nations over their crisis Soros was proposing to construct the facilities for a de facto world government. As it was the enormous loans being granted by the IMF to bail out the collapsing South East Asian economies were already establishing a new, global currency in skeletal form, denominated (for want of a name) in "Special Drawing Right Allocations" or "SDRs"6 . Just as the 1929 Crash forced the state to take over the regulation of the market economy in all nations from the 1930s onwards, so the Crash of 1997 is rapidly foreshadowing the creation of the institutions for a "global state" to regulate the total world economic system. Very soon (if not already) a belief in national sovereignty will have to all the significance of a belief in fairies and goblins.
A Global Depression?
Soros' fears of a world slump are germane. Every day brings new scenes reminiscent of the early 1930s. Banks crash, nations compete with each other in a desperate round of "loser's poker" engaging in a series of beggar-my-neighbour currency devaluations, the public put faith in irrational behaviour (such as handing in their jewellery to the banks in a forlorn parody of the Buddhist prayer ritual), and a marked downturn in world production and commodity prices gathers apace, just as it did in late 1929. Those who debate whether this is the start of a global depression overlook the plight of millions of Burmese and Bangladeshi workers already being repatriated from Thailand and Malaysia7 . For them the Great Depression has already arrived. More important for us at this stage are the lessons we are able to draw from the crisis so far. Firstly the global scale of modern bourgeois wealth has been fully exposed. It is evident that trading in whole national economies has now subsumed trading in individual company shares. Corporate stocks are but a mere subset of the more vast investment media which have had to emerge to cater for the titanic investment needs of the ultra rich. This scale of bourgeois wealth indicates the increasing polarization of the world's population into a mass of proletarians and a monopolistic clique of international bourgeoisie.
But this very polarization is amplifying the severe contradictions of private capitalism. As it generalizes the tensions between the mutually exclusive interests of private capitalists into a single crisis, it harmonizes the link between revolutionary proletarian consciousness and the reaction to it, an immediate retreat of capitalist confidence. This link, diffused throughout myriad local conditions in previous crises, is now revolutionized by a global capitalist crisis into an effective transmission belt. Globalized capitalism, in attempting to co-ordinate its troubled world economy, is simultaneously co-ordinating its own total negation ever more efficiently. Thus an uprising by Albanian workers is rapidly communicated around the world as a gargantuan financial confidence crisis. The theory that capitalism will mass produce its own gravediggers is becoming an observable economic fact! In their panic to resolve this problem and save their investments, the propertied classes have run blindly into the arms of a further negation. They are finding themselves having to propose the formation of structures, at a larval stage, which, if carried through would result, as Soros himself admits, in the creation of world government:
"To argue that financial markets in general, and international lending in particular, need to be regulated is likely to outrage the financial community: yet the evidence for just that is overwhelming...international capital movements need to be supervised be-cause the private sector is ill suited to allocating credit"
We are put in mind, by Soros's comments of the analysis of the advanced worker's movement in the 1960s:
"Since the great crisis of 1929, state intervention has been more and more conspicuous in market mechanisms; the economy can no longer function steadily without massive expenditure by the state, the main "consumer" of all noncommercial production. A relentless logic pushes the system toward increasingly state-controlled capitalism, generating severe social conflicts."
That relentless logic is now pushing the system towards an increasingly world-controlled capitalism.
Whatever the final outcome of the current crisis it has highlighted the disproportionate power a revolutionary critique can wield. If a ragtag army in the Mexican jungle can rattle the world's markets, and the mass mutiny of Albanian workers plunge it into a global crisis, we need only muse on what a revolutionary uprising in a more advanced economy could achieve. Resembling Albania in every respect except scale, in which respect it vastly out ranks it, Russia is an unstable and historically revolutionary society. Even the ultimate revolutionary society, America, is not beyond revolutionary critique by its workers. It has never witnessed class tensions as profound as it is facing today. Who knows which society the current crisis might encourage the world's workers to seize, now that the world's capitalists have been forced to show us how vulnerable they really are.
- 1"Crystal Ball Gazers blinded by the Asian Model", Evening Standard, 8.1.98.
- 2"Two Local Wars", Situationist International 11, 1967
- 3"Did US bank send in battalions against Mexican Rebel Army?" Independent on Sunday 5.3.95.
- 4"World Trade Slumps as Tigers Flag" Guardian, 11.4.97.
- 5"Soros in Call for Global Loan Body" Guardian 1.1.98.
- 6"The World Coughs up to Cure Asian Flu", Guardian 1.1.98
- 7"Crystal Ball Gazers Blinded by the Asian Model", Evening Standard, 8.1.98.
- 8"Avoiding a breakdown: Asia's Crisis Demands a Rethink of Regulation" Financial Times 31.12.97.
- 9"Two Local Wars" Situationist International 11, 1967